Bank of America and Citi reports are junk

Commentary: Another quarter of surprises isn’t surprising

SAN FRANCISCO (MarketWatch) — Sugarcoat it all you want. Let the analysts try to make sense of it. Buy the story you’re being fed. The reality is, Bank of America Corp. and Citigroup Inc. turned in garbage reports parading as fourth-quarter earnings Thursday.

PR Newswire

B. of A. CEO Brian Moynihan.

Special and one-time charges, unforeseen costs, settlements, legacy costs, foreclosure legal fees — it was a junkfest. But that’s not even the worst of it.

These types of quarters happen with such regularity for banks these days that to suggest they’re year-end, “kitchen sink” quarters is an insult to sinks, kitchens, quarters and, mostly, investors.

At Charlotte, N.C.-based Bank of America
BAC, -1.38%
Chief Executive Brian Moynihan said the bank would take $2.7 billion in one kind of mortgage-related charge and another $2.5 billion tied to a separate charge. Still, he wrote with a straight face, the bank is “strong and well positioned for further growth.” See full story on B. of A. profits.

Citigroup

Citigroup CEO Michael Corbat.

Meanwhile, up in New York, Citigroup
C, -0.71%
posted a 25% increase in quarterly profit. But lo and behold — there was a $1.3 billion surprise in the form of legal costs, another $305 million charge, more losses at Citi Holdings, and a charge for an increase in the value of its own debt (a confusing and questionable rule that’s on the accountants, not the bank). Read report on Citigroup’s results.

More alarming, Michael Corbat, Citi’s new CEO, had the audacity to blame regulatory costs for the bank’s performance — as if it were operating under some especially onerous rules that others weren’t.

Even with these “special” and “one-time” circumstances stripped out, these banks continue to be black boxes. Investors’ only choice is whether to trust the junk they spew forth.

The bottom line is that, quarter after quarter, these banks turn in financial reports that are impenetrable and full of what analysts politely call “moving parts.” It’s nearly five years since the dark days of the financial crisis, yet it’s still not clear if these banks are digging out or deeper.

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